Why Brian Hayes went from searing critic to chief defender of banks

New BPFI chief wants banks to speak out on housing and the economy

"It goes up and down like that," says Brian Hayes, as he presses a button to move his hi-tech desk lower in the plush offices of the Banking & Payments Federation Ireland above the Ivy restaurant on the corner of Dawson Street and Molesworth Street.

Hayes has just swapped the European Parliament in Strasbourg to become chief spokesman for an industry that he was a major critic of during his time as an MEP.

Once thought of as a future taoiseach, and a 25-year veteran of politics, Hayes’ move raised more than a few eyebrows among the chattering classes when he announced the switch last November.

Hayes says he had planned to stand for Europe again before being approached by a headhunter last September. His wife and children had already made the move back to Dublin by that stage and Hayes was commuting to Brussels and Strasbourg.


“Part of me was asking the question at a personal level, do I want to be living out of a suitcase for the next five years? Being an MEP is a lovely job, it is fascinating, it’s interesting, you’re meeting great people, you’re at the centre of things but how relevant are you is another matter. I had to ask myself that question having done politics for 25 years … I did say I’d be out by the age of 50.”

The surprise is not so much that Hayes quit politics but that he took a job as the front man for the banking industry, which is toxic in the eyes of the public following the €64 billion bailout just under a decade ago, the treatment of those in mortgage arrears, and the tracker mortgage scandal.

In a speech to BPFI's 2014 conference, Hayes said Irish mortgage customers were being "fleeced" by our banks, a drum he banged for most of his time in Strasbourg. The following year he called for the Competition and Consumer Protection Commission to investigate mortgage rates in Ireland, and separately said a "special bank levy" should be introduced to provide additional relief through the tax system for variable rate mortgage holders.

"The good news is that since then the rates have come down," Hayes says with a little grin, while gazing out his large office window in the direction of Leinster House. "There's a reason they're high and we can go through the reasons and I'm happy to explain that to people."

In Ireland, the standard variable rate (SVR) is just more than 3 per cent while across the euro zone it’s about 1.8 per cent. Hayes says there’s a “better understanding” now as to why SVRs are more expensive here.

“It is often difficult to explain to people the cost of provisioning, the cost of capitalisation, the risk appetite now, the way in which risk weighted assets are identified now,” he says.

Was he just not well enough informed as a politician?

“Lots of politicians said lots of things at the time and sometimes, on reflection, they are a bit more complicated and I’m equally responsible for that as other people are. The understanding of the mortgage market now is a little bit more nuanced than was the case then but there’s still a way to go.”

But how can someone who was such a trenchant critic of the banks become their chief spokesperson?

“I was a critic. I put my hands up. It’s interesting that they’ve asked a critic to take up this responsibility rather than someone from the banking world and I think that, in itself, shows the direction of travel that they want to go.

“I stand by the comments I made at the time. My understanding is certainly better now than was the case and I suspect most politicians know now what’s happened in terms of interest rates.

“I’m going in with my eyes open, my reputation is on the line because I’m chief spokesperson. And I know that. But I’m up for that challenge.”

‘Take the stage’

In terms of why BPFI wanted Hayes, he says: “They wanted someone to take to the stage again, to start explaining their business and why they have to do things and someone who is fluent enough in financial services.

A contrast then to his predecessor Noel Brett, who kept a low profile.

“They recognise that the bunker mentality that was there since the tracker scandal had to come to an end. The banks have to start speaking as an industry voice again. That’s why they came to me.”

The tracker scandal is one that has dogged the banking industry for the past four years. Some 40,000 accounts were denied a tracker for one reason or another post the crash, with most of the lenders at the time found to have issues in the Central Bank of Ireland's industry wide examination. The bill to date for the industry runs to about €1 billion.

Hayes accepts that coming so close to their post-crash bailout, the tracker scandal “set the banks back to ground zero level”.

Banks need to start arguing why it's important to get non-performing loans down

Why has it taken so long to deal with this issue?

“It was a culture of the time where no one wanted to admit the mistakes that have been made. Maybe they saw it as a tactical advantage. Some of the banks realised earlier than others about the scale of the problem but the industry let itself down in responding to that.

“It would have been much easier had the industry realised what had happened and fessed up earlier. I don’ know when the Central Bank will reveal the final number but hopefully it will be sooner rather than later. It’s important for an industry perspective that the examination is concluded.”

Do the banks really understand the damage done to their reputations? “Yes they do. They understand the systemic damage caused by their failure to realise the problem and to act on an industry-wide basis to respond to that.

“I had long discussions with them about this before I took the job and there is a realisation that huge mistakes were made and that the response by industry was sub standard. At the end of the day, as an industry, we let people down. I accept that fully.”

Strategic plan

Hayes plans to present his three-year strategic plan to the board of BPFI after the summer. A decision has just been made to hire a second staff member in Brussels for lobbying purposes, he says.

A “positive announcement” will be made in the coming weeks around more funding from the retail banks for Social Finance Foundation, which has received more than €70 million in lending for 1,000 community projects to date. “That could be in the tens of millions over the next five years.”

He also wants banks to begin speaking out on key issues around housing policy, the development of SMEs and the wider economy.

“We’ve got to get to the floor on things like green mortgages, like retrofitting of houses, how [Minister for Climate Action] Richard Bruton’s plans in terms of how climate change works. We need to take a position on these issues.”

There's also the issue about the use of data into the future, and Facebook and Google's entry into strands of financial services. He notes how JP Morgan, the world's biggest bank, holds just one-quarter of the data of Facebook.

In addition, he’d like to foster greater co-operation between financial services industry groups and to get the banks to a “better place” on instant payments in the face of competition from the likes of Revolut and even the social media giants.

“It’s going to be the customer experience that will define this in to the future. The banks will have to really up their game in terms of their offering to customers. I’m not so certain that the public will trust the Facebooks, etc.”

And Hayes is keen that the banks explain to customers the impact of costs of de-risking their business models, which has involved more intrusive and costly regulation.

“For every €1,000 we lend we have to have €50 in the bank on average. It’s €16 for the same €1,000 across the euro zone countries. If we’re going to move to this brave new world, people have to be aware of that.”

In terms of the housing crisis, Hayes says consideration should be given to reducing VAT on new build homes, and he would also like to see the Help to Buy scheme renewed this year.

“About 35 per cent of the cost of building a house is tax, VAT. I was that soldier once in the Department of Finance [as junior minister] when fellas would come looking for a reduction in VAT and I know the short shrift they got.

“And I would certainly like to see some certainly on Help to Buy. It’s helped the affordability gap for the guard and the teacher with the deposit.”

He bristles at talk of a tsunami of repossessions by banks. “We’ve had 38 repossessions in the first quarter of this year, about 3,300 since the start of the crisis. Ireland is a risky place to do banking otherwise we’d have a big queue of people looking to go into retail banking in this country. Why aren’t they doing that?”

Not surprisingly, Hayes is not a fan of the Bill proposed by Sinn Féin's Pearse Doherty whereby a lender would have to get the permission of a mortgage holder before selling their loan on to a third-party, often referred to as vulture funds.

“This would bring the whole [mortgage] securitisation process to an end,” he says. “They [banks] use it for liquidity and this would put even more pressure on the system. The banks need to start arguing why it’s important that we have secondary markets and why it’s important to get non-performing loans down.”

Pay for bankers

Hayes will also have to deal with the thorny issue of bankers pay. The three retail banks bailed out by the State – AIB, Bank of Ireland and Permanent TSB – are subject to a salary cap of €500,000 while bonuses are effectively prohibited due to a 89 per cent tax on any such payments.

Korn Ferry recently conducted a review for the Minister for Finance Paschal Donohue but he has yet to bring any recommendations to Cabinet.

Hayes accepts there are no votes for the minister in relaxing the restrictions but would like changes to be made. “I would like to see an unwinding of the strict position in terms of bonuses and in terms of the taxation system and the 89 per cent [rate] that applies on variable pay because long term it’s not sustainable.

“There is a risk in those three banks, particularly in key functions like data, IT, and risk management. If someone can effectively double their pay in a labour market they will do that.”

I think people will look back at Kenny's period in government and say he was one of the best taoiseachs ever

Fair enough, but there’s nothing to stop the three banks from paying an IT whizzkid a salary of up to €500,000 to retain their services. Hayes says such “rises in basic pay” is not a good way for banks to deal with the issue.

“Over a period of time we need to unwind these things in an agreed way and normalise the pay structure,” he says, adding that if the ban on bonuses wasn’t in place European Banking Authority rules would apply allowing for a clawback of bonuses in the event of future scandals.

Hayes doesn’t want to set a timeframe on any change.“You couldn’t address this until the final examination of the tracker issue was resolved. This is a political issue … I don’t want to make the situation worse for the Government but it has to be resolved. It’s not a sustainable position that three banks are in one category of pay policy and every other bank is in another category of pay policy.

“Some realistic timeframe for the unwinding of this would be the sensible approach, to do it in a gradual and integrated way where public confidence and the alignment of the State’s interest were clear. We need to make progress on this but you would need the wisdom of Solomon to solve this issue.”

Hayes declines to reveal his own pay. “That’s a mater between me and the board.” But he doesn’t earn a bonus.

Early days

Hayes was born in Dublin and raised in Clontarf. His father worked in Nestlé and his mother for the Irish National Teachers Organisation. The youngest of three (he has two sisters), Hayes was sent to boarding school at Garbally College in Ballinasloe, travelling home every six to eight weeks.

“It wasn’t a very elite boarding school ... I loved it.”

He studied at Maynooth university and then Trinity College, completing the HDip, thereby opening the door to a teaching career.

“I thought I was going to teach ... [but] the first job I got was as youth officer with Fine Gael.”

He wrote speeches for John Bruton, who appointed him to the Seanad in 1995 during his time as taoiseach. Hayes later won a seat in the Dáil in 1997 before losing it in 2002, returning to the Seanad and winning his Dáil seat back in 2007.

In 2011, Enda Kenny appointed him as junior minister at the Department of Finance to Michael Noonan, in spite of the fact that Hayes had supported a move against Kenny as party leader a year earlier.

Three years later he won a seat in the Dublin constituency for the European elections in 2014, and reckons he would have retained this seat had he chosen to go again. Instead, he chose a move to the private sector.

On the challenge ahead, he sees analogies with Archbishop Diarmuid Martin and the Catholic Church.

“He’s one of my heroes, a really authentic voice in the country. He said the problem with the Catholic Church is that it’s imprisoned by the past. It’s kind of analogous to the banks at the moment. They are imprisoned by the past. They feel guilty, even people who weren’t responsible for any of this. My job here is to try and help them unlock the door of that prison and get them back into rehabilitation. If I can make a few small steps in that direction I will have achieved something.”

Brian Hayes on...

Life as an MEP...

“Going to the European Parliament is a bit like going back to college and being paid for it. You meet all these very interesting people and there are lectures you’d love to go and listen to, even though they’re not in your area.”

Being tipped as a future Taoiseach...

“I don’t think I have the temperament to be taoiseach. I don’t think I really have the desire to be taoiseach. There comes a point where you’ve got to be a 24/7 merchant in politics to really want to do that, and life has other priorities for me right now.

On Enda Kenny (who he tried and failed to topple as party leader in 2010)...

“I hold no ill will to Enda at all, he put me into a really good job in government, one of the best junior ministries, which I really enjoyed. I learned more in three years with Michael Noonan than I did in the rest of my time.

“He put up with a lot of trouble and difficulty... I think history will be really kind to him. In 20 years time I think people will look back at Kenny’s period in government and say he was one of the best taoiseachs ever. I didn’t think I’d say that 10 years ago but I’m saying it now.”

Leo Varadkar versus Micheál Martin at the next election...

“Leo is going well. He will be a real asset to Fine Gael in the [election] campaign. But he’s up against some performer in Micheál Martin, who’s the comback kid. Who would have thought Fianna Fáil would be where they are now? It’s extraordinary and he deserves some credit for that.”

On Christine Lagarde's nomination to be the next president of the European Central Bank.

“I’m a big fan. When [Michael] Noonan used to let me go to the Eurogroup meetings, at about two in the morning we’d still all be at it and she’d come around and give everyone a bundle of M&Ms to keep theme going until four in the morning. She was great.

“She’s someone who has huge credibility in the financial system. Largarde brings a pragmatic central banker role to it. She has a huge knowledge of Ireland and her and Michael Noonan got on great.”

His career in politics...

“One thing I do regret is going into politics at the age I did. It’s very addictive politics, it’s like a cocaine rush - I’ve never done cocaine by the way. But it’s quite institutionalised and I’m one of a very small group of people who have managed to get out on my own terms and go into the private sector.

“My regret is that I might have been a better politician had I gone into it in my forties rather than in my twenties. I was elected at the age of 25…ridiculous. What do you know in your twenties?”


Name: Brian Hayes

Job: New chief executive of Banking & Payments Federation Ireland.

Age: 50 in August.

Lives: Clontarf.

Family: Married to Genevieve with three children.

Hobbies: Golf (handicap 11), reading history. “I like going to the races the odd time. I’m a jumps man but I don’t know much about it mind you.”

Something we might expect: He’s a current affairs junkie. “Even if I miss Sean O’Rourke’s radio programme or the News at One during the day I listen to it at night. Isn’t that sad?”

Something that might surprise: “I want to join a choir and I’m singing for a special occasion that I can’t tell people about because it’s a secret.”